ITAT New Tax Regime 115BAC Benefit 2026 | E-Verification Delay

What Happened?

The Income Tax Appellate Tribunal (ITAT) has recently ruled that taxpayers who filed their income tax returns before the statutory due date are entitled to claim the New Tax Regime benefit under Section 115BAC of the Income Tax Act 2025, even if the e-verification of the return was completed after the due date. The tribunal classified delayed e-verification as a procedural lapse rather than a substantive defect, thereby protecting the taxpayer's right to opt for the new tax regime.

This judgment is particularly relevant for Assessment Year 2025-26 and AY 2026-27, where many taxpayers have faced notice from Assessing Officers (AOs) denying the 115BAC benefit due to late e-verification timestamps.

Background & Legal Context

To understand this ruling, it is crucial to know the legal framework governing New Tax Regime and e-verification requirements.

Section 115BAC of Income Tax Act 2025

Section 115BAC (previously Section 115BAC under the 1961 Act) introduced the optional New Tax Regime for individual taxpayers. Key features include:

• Lower tax rates compared to the Old Tax Regime (without deductions under Chapter VIA)
• The benefit is available only if the taxpayer opts for it in their income tax return
• Once opted, the taxpayer continues in the new regime unless they explicitly switch back
• The option must be exercised by filing the return within the due date prescribed under Section 139(1) of the IT Act 2025

E-Verification Requirements

Since the introduction of digital filing, the Income Tax Department mandates e-verification of returns filed online. Under Rule 12AA of the Income Tax Rules 2025, e-verification must be completed within 120 days of filing or by the due date for filing the return, whichever is later. However, the failure to complete e-verification within this period had been interpreted by some AOs as disqualifying the taxpayer from claiming 115BAC benefits.

This created a practical problem: Many taxpayers filed returns on time but due to technical issues, postal delays, or procedural delays on the Income Tax Department's end, e-verification certificates (Form 61) were received after the due date. The AOs denied 115BAC relief in such cases, arguing that the return was not "properly filed" because e-verification was incomplete.

The ITAT's Legal Reasoning

The tribunal drew a clear distinction between:

• Substantive requirements: Filing the return before the due date with all required schedules and declarations
• Procedural formalities: E-verification timing, which is an administrative follow-up to the filing

The ITAT held that e-verification is a post-filing formality required to comply with the Income Tax Department's digital filing procedures, but it does not determine whether the taxpayer's option to choose the new tax regime was validly exercised. The option is exercised at the moment of filing, not at the moment of e-verification.

This interpretation aligns with the principle established in earlier cases under the old Income Tax Act 1961, where courts have held that procedural delays should not prejudice taxpayers who have complied with substantive requirements.

What Does This Mean for You?

For Individual Taxpayers

If you filed your income tax return before the due date and opted for the New Tax Regime (Section 115BAC), but received a notice from the AO denying this benefit due to delayed e-verification, you now have strong legal backing to appeal such a denial. The ITAT ruling supports your claim that your option was validly exercised.

Practical impact: You can claim the lower tax rates available under Section 115BAC, which could result in significant tax savings depending on your income level and composition of income.

For Salaried Employees

Salaried individuals who file returns before the due date but face e-verification delays can now confidently assert their right to 115BAC benefits. This is especially relevant for AY 2025-26 and AY 2026-27, where many salaried employees switched to the new regime.

For Business Owners and Professionals

Self-employed professionals and business owners claiming the new tax regime benefit are equally protected under this ruling. The benefit extends across all categories of taxpayers—individuals, Hindu undivided families (HUFs), and other applicable categories.

For Taxpayers Under Assessment

If you are currently facing an assessment order that denies you the 115BAC benefit due to e-verification delay, this ruling provides grounds for filing an appeal before the ITAT. You can cite this judgment and request the AO to allow the benefit under Section 115BAC.

What Should You Do Now?

If You Are Still Within the Assessment Period

• Step 1: Check your return filing date and e-verification completion date from the Income Tax Department portal (www.incometaxindia.gov.in)
• Step 2: If your return was filed before the due date but e-verification was completed after, gather documentary proof of both dates
• Step 3: Write to your AO pointing out that you had opted for 115BAC in your return and citing the ITAT ruling that e-verification timing is a procedural matter
• Step 4: Request the AO to compute your tax under Section 115BAC instead of the Old Tax Regime

If You Have Already Received an Assessment Order

• Step 1: Verify whether the AO has denied you the 115BAC benefit due to e-verification delay
• Step 2: File an appeal before the ITAT under Section 246(A) of the IT Act 2025
• Step 3: Attach a copy of this ITAT judgment to your appeal memorandum
• Step 4: In your grounds of appeal, clearly state that the procedural delay in e-verification should not affect your substantive right to claim the new tax regime benefit

If You Are Filing Future Returns

• Continue to file returns before the due date and clearly indicate your choice of tax regime
• Complete e-verification as soon as possible to avoid unnecessary complications
• Maintain records of your filing and e-verification dates
• Keep a copy of the return acknowledgment from the Income Tax Department

Professional Assistance

Given the complexity of tax regime selection and the consequences of choosing wrongly, it is advisable to consult a qualified Chartered Accountant before filing your return. A CA can help you determine which regime (new or old) is more beneficial for your specific financial situation, file your return correctly, and handle any subsequent assessment issues.

Key Takeaways

• E-verification delay is not grounds for denial: The ITAT has clearly held that delayed e-verification cannot disqualify a taxpayer from claiming the New Tax Regime benefit, provided the return was filed timely.
• Filing date is critical, not e-verification date: The option to choose 115BAC is exercised when you file the return, not when e-verification is completed. Therefore, the filing date is what matters legally.
• Procedural vs. substantive defects: Courts distinguish between procedural lapses (which do not harm substantive rights) and substantive defects (which do). This ruling reinforces that distinction in the context of tax regime selection.
• Relief available for past years: Taxpayers in AY 2025-26 and AY 2026-27 who were denied 115BAC benefits due to e-verification delay can now seek relief by approaching the AO or filing an appeal before the ITAT.
• Taxpayer protection strengthened: This ruling protects taxpayers from being penalized for administrative delays on the Income Tax Department's side, ensuring fairness and adherence to the principle of tax justice.

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